Cash Connection Essay

AbstractThe payday lending industry is a very competitive industry established in the 1990’s, designed to give citizens the option to receive a quick fix regarding financial issues, in an effort to make ends meet. The main objective for those in the payday loan industry “should be to serve customers in compliance with the rules of the industry and better educate them on the services and products they offer” (Personal Communications, 2012). This industry raises the controversial topic of ethical, or unethical, and to this day is still being disputed.

Cash Connection’s strategy is “to provide financial products and services to the unbanked and financially underserved customers”(CashConnection.eu), also to set themselves apart their competition with the intention of becoming the most dominant franchise in the lending industry. The lending industry was established to provide citizens in a financial crisis with quick cash loans while adhering to the rules of the industry, and informing them of the importance of wise borrowing.

A focused differentiation strategy is defined as “concentrating on a narrow buyer segment and outcompeting rivals with a product offering that meets the specific tastes and requirements of niche members better than the product offerings of rivals”. Cash Connection is taking this approach by offering attractive features to its customers that its competitors cannot offer. The different characteristics consumers find valuable when searching for a quick cash loan, such as lower interest rates, and larger loans have an impact on the consumer’s purchase decision. Cash Connection uses that to their advantage by focusing their strategy around those features in an effort to become the leading lending franchise in that industry. In the excerpt given by Paul Smith there is evidence that suggests that Cash Connection’s strategy and business model is ethical. “Individuals taking high interest loans were...

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...CashConnections current strategy is to distinguish themselves from other competitors. They want to gain the prime portion of the $40 billion dollars of paid lending that the US industry has to offer. To do this they must follow government restrictions and meet customer needs. One of their main targets is an unbanked/underbanked customer.
They problem is the company’s present strategy is not working that well. Over a three-year span, from 2007-2009 they have experienced a steady decline in net income. The have failed to distinguish themselves from their competitors. They have also failed to retain many exiting customers.
SWOT ANALYSIS
High interest rates and roll over fees is a factor in the profitability of CashConnection. They have the ability to offer short-term cash loans that banks’ cannot. They offer services to unbanked and/or underbanked individuals that are not a priority in banks’ business strategy. Two other important strengths are availability and convenience. A major weakness of CashConnection is that it is hard for them to distinguish themselves in a major way from other pay day lending companies. An opportunity that may be out there is to expand its target market to include higher income consumers. Another potential opportunity is to expand and reach other potential cities. They also have an opportunity to expand their services and offer different...

...CashConnection
Payday Loans
Strategy, Ethics and Forces
1. What is CashConnections strategy?
* Differentiate itself from competitors to gain the largest piece of the $40 billion dollars of paid lending that the United States industry has to offer, while adhering to government restrictions and meeting customer’s needs.
Reference: Thompson, Peteraf, Gamble, and Strickland. P. (2010). Crafting and Executing Strategy: The Quest For Competitive Advantage Concepts and Cases (18th ed.). Page, C-114.
Which of the five generic strategies discussed in Chapter 5 most closely fits the competitive approach that CashConnections is taking?
* I choose a broad differentiation strategy as a best fit. Allen Franks seeks to produce a competitive edge by incorporating attributes and features that set his payday loan company apart from rivals in ways that buyers consider his services more valuable. Successful differentiation will allow his firm to:
* increase sales by increasing customer base and
* increase brand awareness. Since the market is diverse, CashConnections has the ability to broaden its horizons through the use of differentiation.
Reference: Thompson, Peteraf, Gamble, and Strickland. P. (2010). Crafting and Executing Strategy: The Quest For Competitive Advantage Concepts and Cases (18th ed.). Page, 136.
2. Is the company...

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CashConnection: Are its Payday Lender Strategy and It’s Business Model Ethical?
CashConnection is a pay day advance short-term lending company, offering quick cash for people who might not always have cash readily available. Other services Cashconnection provides include check cashing, bill payment services, prepaid phone cards and money orders.
1. What is Cash Connection’s Strategy? Which of the Five generic competitive strategies discussed in Chapter 5 most closely fits the competitive approach that CashConnection is taking?
Cash Connection’s strategy is to target low-income people in financial trouble. Their strategy is to offer quick money with very few requirements and services that are not offered by commercial banks. Their main target is specifically people who live paycheck to paycheck who are eager for quick and easy loans. However, in return Cashconnection offers these quick loans at very high interest rates at which they are able to make a profit and keep their customers. Of the five generic competitive strategies discussed in Chapter 5. I think the differentiation strategy fits the competitive approach that CashConnection is taking. I think this strategy approach fits the company because Allen Frank the president of...

...CashConnection
1. What are the dominant economic characteristics affecting the payday lending industry?
The industry for short-term cash loans (payday loans) grew in the early 1990’s because of the shift in financial services marketplace. The cost structure of the market rose due to bounced checks, overdraft protection fees, and late bill payments penalties. Second the trend of regulation of payday advance service that allowed protection for consumers. To avoid such cost, payday loans were the solution for consumers.
It is estimated that there are over 22,000 payday loan locations in the United States. Those locations exceed the number of banks, which are 9,500 banks across the nation. Studies show that million middle-class households used the payday loans to extend about $40 billion in short-term credit each year. Middle-class households used the money to cover shortfalls or emergency between paydays. Analysts estimated that 5% of the population has taken out at least one payday loan at some time. Also 24 million Americans say the chances of taking out a payday loan are somewhat or very likely. The industry contributed $10 billion to the U.S. gross domestic product in 2007 and 155,000 jobs. It is safe to say the payday industry has met half the potential market and there is great opportunities for growth.
2. What is competition like in the payday lending industry? How strong are each of the competitive...

...Stephen Prather
Case Study 2: CashConnection: Are Its Payday Lender Strategy And Its Business Model Ethical?
The Situation:
Allen Franks, President of CashConnections, a short-term cash lending firm realized that the most profitable endeavor in the check-cashing store industry is to set up stores in towns where no check-cash stores exist. Setting up CashConnections in these places, his business became one of the leading companies in his industry by the mid to late 1990’s. The payday industry grew from larger financial institutions leaving the market, huge overdraft and late fee costs, and increased regulation of the firms allowing higher consumer trust. In an industry that reaches to 10% of all U.S. households, advanced about $40 billion in short-term credit a year, and contributed $2.9 billion in direct labor income, CashConnection utilized Sun Tzu’s principle of attacking where unprepared to beat his competitors. Charging these enormous fees and costing only around $130,000 to start-up, the industry entails a lucrative structure.
The Complication:
There has been some concern for how high the fees are and how the model could take advantage of those caught in a troubling financial situation. Payday loans averaged around $300, and...

...Recommendations for CashConnectionCashConnection – Case Study Analysis
2/24/2011
2/24/2011
We have come to the conclusion, after analyzing all information of the financial services industry, that the below recommendations will assure that CashConnection will maintain is dominant market shares and differentiate itself from other competitors in the Payday Loan Industry.
Recommendation:
1) Increase CashConnection locations across the United States for targeting middle income, average education, young families, and non-home owners
2) Implement a loyalty programs to reduce fee for new or loyal customers.
3) Apply research and marketing to develop service that sparks an entrepreneurial mindset and self-empowerment.
4) Offer Line of Credit / Credit Cards in the amounts of Typical Loans at reasonable annual percentage rate.
Recommendation 1:
Although the financial stability (Appendix 4) of CashConnection is declining due to government regulations and the declining economy (Appendix 5) CashConnection should maintain and continue a steady growth rate in opening new locations where it complies with Cash Connection’s business model requirements. (Appendix 6) Growth and expansion are a key factor in establishing and retaining loyal customers. With a low startup cost...

...decline. • Table 1 displays the financial performance of CashConnection from 2007-2009 which will reflect the declining nature of the overall payday loans industry. Table 1: Excerpts from CashConnections Profit/Loss Statement (6-7) Jan-Dec 2007 Total Income Total Expenses Net Operating Income Net Income $1,336,617 $342,689 $271,961 $6,348,544 $5,017,173 $1,331,171 Jan-Dec 2008 $6,283,860 $5,488,623 $795,237 Jan-Dec 2009 $5,768,805 $5,569,912 $198,893
•
This decline is due largely to the fast-growing number of competing firms in the industry, other financial institutions finding ways to differentiate themselves and become more appealing to customers, saturation of competitors, and overall decline in economy.
Number
of
Rivals
2
Invictus
Footwear
•
The payday loan industry is comprised of two main industry segments: 1) Small, local payday loan franchises with less than 51 locations nationwide such as CashConnection. 2) National payday loan franchises with more than 51 locations such as Cash Advance America, Check & Go, and Check America.
•
The industry is not consolidating to a smaller number of competitors, instead it is forecasted that more small, local payday loan franchises, that will be established to meet consumer needs.
Scope
of
Competitive
Rivalry • • Rivalry in the payday loan industry is on...

...CashConnection
Case Analysis
Abstract
Recent years and hard economic times have led to a boom in payday advance lending services. These services are a great option for quick cash for a few people. However, in general these companies pray on those who cannot afford their high interest rates.
CashConnection
The current United States economy is and has been in a slump for several years now. This added financial pressure continues to take its toll on Americans who live pay check to pay check or face adversity. Adapting to the market, payday loan companies are seeing all-time high profit margins. However, these same flourishing companies are coming under great scrutiny by many borrowers and stakeholders alike. There short term high interest loans allegedly trap borrowers into a vicious cycle of debt.
What is Cash Connection’s strategy?
CashConnection is one lending company which has received allegations of predatory lending. Their business strategy is to target low income areas, specifically where people live paycheck to paycheck. They then offer quick and easy loans with few requirements. However, they charge astronomical interest rates. Some interest rates are as high as 400 percent annually. By trapping people into this month to month cycle of interest they are able to make a profit and keep customers loyal.
Which of the five generic...